'Anybody have any partnership/merger success stories?
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  1. #1
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    Default 'Anybody have any partnership/merger success stories?

    I am pretty much hard/fast against partnerships. Like, REALLY against. But, I am also open minded. And, try not to make hasty decisions.
    So, I have had a business proposition tossed my way. My gut says "HELL NO" (as I am sure most of you will).
    I know there are tons of partnership horror stories. I can share a few personally. But, anybody got any success stories?
    Most of you guys are familiar with my shop, and what I do (6 CNC's 1-4 men (including myself and the wife)).
    If you have any input? Try to keep it relevant. I don't need to hear about fortune 500 mergers, LOL.

    I don't have a ton of details right now. All I really know is:
    A dude I know is losing his main guy. Has a ton of work, most of which is his own product.
    His shop is equipped about the same as mine. I have 5 mills, 1 lathe. He has 4 mills. I have two pallet changers, he has one horizontal.
    My pallet changers are tied up with production. His horizontal is tied up with production. I definitely need more iron right now. I think he is good.
    We both work in the same segment (not competitors though). And, both gross about the same yearly (he did more than me 2019, I will probably top him 2020).

    At this point in time I have TONS of work. More than I can handle, and have actually been subbing stuff out (which I absolutely can not stand doing!).
    I need at least one, maybe two more mills. I'm losing a guy tomorrow, and having a hard time trying to replace him.
    But, I'm thinking right now I need two more parts swappers, maybe three.
    I'm tired of working a full day (8am to 6pm), then running parts with the wife for another 4 hours until 10pm after everybody has gone home.
    I'm trying to hold tight until we see what happens in Nov. as, I do not want to experience what I went through last year again (way to much overhead, not enough work).

    Anyways, we are both bringing a lot to the table. I however have more debt than him. Roughly $100k vs. roughly $20k.
    Basically what it boils down to is this:
    I am good at running a shop, and making parts happen (as long as I have man-power and tools available).
    He is good at product ideas, marketing, sales, and growing his brand.
    I am not good at what he is good at. And, he is not good at what I am good at. He knows this (this is his idea, not mine).
    And, I think he thinks the sum of two, could equal three in this case. I think he is probably right. But, partnership!
    It would probably be kick ass until we butt heads.

    Like I said, nobody needs to talk me out of this! LOL. But, has anybody seen anything like this actually work? (I haven't)

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    I know of several partnerships that are successful but I think at the level you are speaking of, it comes down to tolerance of others practices and directions. I personally know I would not be able to partner with another “equal” because of the fear of butting heads. There needs to be very clear and separate duty for each of you to lessen the chance of upsetting each other. Basically, I think failures at this level are more based on personality deference’s than anything.

    Of course the questions you ask are only going to receive opinions. What does your gut tell you?

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    Sit down and put together a organizational chart, and a business plan, with the guy. Find out what questions you both have about each others' operations, and where you both see each other in the daily operations of the joint venture. Go from there.

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    Around 2010 I partnered up with two guys right there in Gilbert to set up their shop and get things moving. One Haas mill, Haas lathe, and a Kiwa Colt Mill. The two owners (one owns an insulation company and the other is some sort of contractor) bought the machines from a closing shop best I remember and only one was a basic machinist. They offered me a percentage of the company in lue of a reduced salary plus commision.

    I got everything setup and business was booming, I couldn't believe the industry there along with a couple of customers I brought to the table as well. Within the first week we had to bring on another machinist and a full time CAD jockey. There was not much butting heads but then again they had other businesses that occupied most of their time and I would see them maybe twice a week for a few hours a night. <<< That to me was the key to getting along.

    Everything was cruising along smoothly for a few months but I started getting hammered with "Buddy Favours" and wasn't making any commission. After trying to make them understand living in an extended stay hotel plus supporting a wife back in Tennessee didn't leave much room for freebie work on half salary I was kinda shunned off.

    It wasn't too much of a big deal as I only had only moved my tools out there. I just chalked that one up to a learning experience that I should make sure the partnership contract is very detailed and signed before ever making the first part. Would I do it again? If the conditions were right then sure, but not with a few phone calls and one meet and greet. Take your time and thing of everything that could go wrong and stick it on contract.

    The last I heard Scott and the other guy were still partnered up and growing so I guess that's kind of a success story. I really wish I could have stuck it out but hard to support a family on half a machinist wage. I actually really enjoyed that town even though it was hotter than a goats ass in a pepper patch. I was gonna stay out there and take a job at that big ATV custom shop since they use Featurecam. But,,,It took all of about 10 minutes with that guy and I realized that relationship would last all of a day at best.

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    Equal partners can come with its fair share of headaches. I work for such a company though, and it's been going strong 43+ years now. My grandfather started out with his business partner in an equal partnership, but when push came to shove, everyone knew that "Mr. Mac" was the guy calling the shots. This worked for our company, we are on second generation ownership, and the same applies. My father is the president and the other original partner's son is VP, even though they each own the same share in the S Corp. Roles and responsibilities delineated roughly as supply base and engineering on our side, sales etc. on his.

    So far, so good. So, yeah, a successful "equal" partnership does work from time to time, but there can't be any room for pissing contests.

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    Quote Originally Posted by g-coder05 View Post
    I was gonna stay out there and take a job at that big ATV custom shop since they use Featurecam. But,,,It took all of about 10 minutes with that guy and I realized that relationship would last all of a day at best.
    Ohh snap! LOL, that's funny. I worked for Johnny many years ago (07'ish). When he first started his shop in his back yard.
    I was the sixth guy, the first to make it past two weeks. And, knew nothing about featureCAM when I started (was a MasterCAM jockey). I somehow made it two years. Not sure how?
    The dude that slid in my spot when I left, held it down for a while. Then left to go on his own (in a partnership, LOL).
    It failed, and now he is back working for Johnny. I hear through another friend of ours that Johnny is a much more pleasant dude these days (post divorce).
    Johnny's place is also where I first met Tommy.

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    My thoughts on a good partnership is a rock solid exit strategy that you both agree to on how to end it, keep it as simple and straight forward as possible. That way when you do bump heads you know exactly what will happen if you don't work it out. And if you can't work it out you know exactly how the dust will settle.

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    Guys I worked for last were partners ,completely different ,but it worked because one ran the outside jobs,one ran the yard.Both had a weakness for office girls ,and multiple divorces....Since selling out ,both zillionaires .......I was in a 3 way partnership way back,55 years ago ,three guys who thought they knew trucks ,machinery ,and had mean ,crazy fathers.......Split up because of wives ,and children,and divorces .But all of us were on the road to wealth,and Im grateful for that ......we were all still good friends until they started dying off.

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    There is a very successful shop in the Bay Area that started as two shops merging into one. When one of the partners got sick the other guy took care of business. Had they not merged I'm guessing the guy who fell ill would probably end up auctioning his assets. Instead he continued collecting a paycheck and was eventually bought out.

    I was entertaining the idea of merging with a friend of mine and we consulted with this successful shops owner. His main advise was write up a divorce agreement before you get married. That way both parties know exactly what's in store before the breakup.

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    if you have the same demeanor, are close to the same age, have the same goals in life. then it will probably work.
    if ones a hothead or selfish only worried about money/ cheap skate/buys shit tools cause there cheap that kinda thing, impressing people etc etc then I would say nope aint going to work.

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    Wheelie, Having read almost all of your shop thread I don't think you want to be 50/50 partners. Just a guess...

    Positive thought about partnerships: I started our shop with my brother, and it works because we are very different. He really isn't interested in the business side, it's more like what g-coder described in that he worked cheap in return for equity. And he is a stellar worker, just an inhuman attention to detail. Since I'm majority owner disagreements are limited.

    But to integrate two existing shops, I have a hard time seeing the 1+1=3. Are you moving your machines to his building? If you fit a horizontal into your shop we're going to be mighty impressed... If you're both running at capacity what will you gain by joining?

    How about working together closely the way some of the Japanese do, or at least the way they talk about in The Machine That Changed the World? I dont know if it's accurate, but they talk about each part of the supply chain opening up their books and going over costs to end up with a price structure where each party made a profit, but not at the risk of anyone gouging and driving up prices/reducing sales. So you're separate but still working together.

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    Quote Originally Posted by LOTT View Post
    Wheelie, Having read almost all of your shop thread I don't think you want to be 50/50 partners. Just a guess...
    Yea, you can pretty much gather from post#1 of my thread, I tried this shit before, LOL.

    The only thing that even keeps the door to my mind slightly cracked is: neither of us are start-ups.
    Hard to believe I am coming up on 8 years. Doesn't feel like it. But, 7+ in, and having survived last years disaster, I think I have some staying power.
    He has been at it longer than I, and probably even better prepared to make it out the other end of a tough year than I am.

    Most horror stories seem to start out: jackass-1 and jackass-2 decide to start a company.
    6 months in they are ready to kill each other because one of them is doing ALL the work. And, they are both broke with bad credit.
    Or one just has no morals and takes the other for everything he has. Or, one is a straight up Darrin (vwfullcup).

    I don't see to many stories of small very like aligned shops joining forces. This seems to be strange territory.

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    One of my best customers was a three-way partnership. They grumbled a bit but lasted thirty years until two out of the three retired. And think of so many big names in machine tools - Lodge & Shipley, Brown & Sharpe, Giddings & Lewis, Gould & Eberhardt ... lots of them. (Better not mention Briggs & Stratton here )

    I think it's more about personalities than anything else. Also you're a little older now so maybe not so adamant about always having your own way ? It's just machines, doesn't really matter in the big picture if you use Kennametal or Sandvik

    Have you thought of something more like a co-op instead of a full-on partnership ? Share facilities and stuff, more like pooling the costs and equipment, keep the businesses separate ? More book-keeping but less internal friction ?

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    What's the goal? It sounds like he desperately needs someone to run the shop - his strength is marketing and sales, and he's losing his main guy. Your ability to run the shop, and get shit done would be great for him.

    What's in it for you? You're already covered with work. What's additional marketing and sales going to do for you? Give you more work to sub out? Sounds like you need more iron and minions more than anything else.

    If a partnership to him gives you access to more iron and minions, it could make sense, but I'm not seeing that from my couch 2000 miles away.

    It would be different if he's got idle machine time/manpower that your parts could go on, or if you've got idle machines to start running more parts for him to sell, but I'm not sure I'm seeing it given the circumstances of 2 already flat out shops.

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    Quote Originally Posted by Fish On View Post
    What's the goal? It sounds like he desperately needs someone to run the shop - his strength is marketing and sales, and he's losing his main guy. Your ability to run the shop, and get shit done would be great for him.

    What's in it for you? You're already covered with work. What's additional marketing and sales going to do for you? Give you more work to sub out? Sounds like you need more iron and minions more than anything else.

    If a partnership to him gives you access to more iron and minions, it could make sense, but I'm not seeing that from my couch 2000 miles away.

    It would be different if he's got idle machine time/manpower that your parts could go on, or if you've got idle machines to start running more parts for him to sell, but I'm not sure I'm seeing it given the circumstances of 2 already flat out shops.
    That is exactly what it does (for me). My buddy has room, and power for more iron.
    And, it would be way easier to find help, simply because his shop is not in some dudes back yard.
    I've been trying to get temp services to work with me for help. But, as soon as they figure out it is residential, they bail.
    The two I was able to get to come survey the shop had a change of tune when they realized it actually is a real job, at a real business.
    Until: I told them there is no bathroom. Employees are welcome to run to one of the many close convenient stores any time they feel like it.
    But, we normally just pee on the cottonwood tree out back. Yea, that turns them right off.
    So I am stuck posting a dumb add on craigslist. With lackluster results.

    And, you are absolutely right. He needs a lead guy in the shop. Its not really his thing.

    Like I mentioned earlier. We would both be bringing a lot to the table. Both in skills/talent, and assets. It's not very lop-sided from my perspective.

    But, my gut still says "hell no".

    EDIT:
    To elaborate on what I said in this post, and the ones before. I am kinda hunkered down for the rest of 2020 just trying to tough it out.
    This is not just my thinking. It stems from my main customer as well. He knows I am ready/willing to do whatever it takes.
    But, he feels the same. Lets struggle through this. And, see how it plays out.
    If the demand/work-load is still there come Jan-1? I am probably going to be looking for a close space to expand. And, there will be a couple NMD's.
    So thinking ahead complicates my decision process greatly. I wish I had a crystal ball! But, I just don't.

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    I honestly would give zero thought to working at a shop that couldn't be bothered to put in a bathroom.

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    A friend and I have a product we collaborate on. He's the marketing/labelling guru, I'm the nuts and bolts production guy, with quite a bit of overlap.

    We both have separate, pre-existing businesses. The partnership owns a trademark, some test equipment and a recipe (less than $2K worth total), and has its own set of books which are settled at the end of each quarter. KISS and trust is the business principle here. Partnership assets are small and there are no great financial stakes, yet. We're 2 years + in.

    We've been friends with common interests for 30 years, which helps a lot. He's also easier to get along with. Think gentlemanly Brit meets Vermont woodchuck/backwoods Hoosier with attitude.

    You might think this is more of a collaboration than a partnership, but partnerships can take myriad forms. It's a lot like a domestic partnership/marriage that gets worked out as you go. Either you work it out or you go.

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    As many others have mentioned you definitely need to have a clear exit strategy and a really solid outline of who is going to do what within the business.

    If you two are buddies outside of business then a good set of relationship boundaries also needs to be adhered to as well. When the work day is over you see each other outside of the shop no arguing about work related issues. It's not an apples to apples comparison but I've seen many fights and family feuds between parents and kids or siblings because of work related issues being dealt with outside of the work place. If either one of you can't manage that part it won't work.

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    Until: I told them there is no bathroom. Employees are welcome to run to one of the many close convenient stores any time they feel like it.
    But, we normally just pee on the cottonwood tree out back.

    they don't have porta potty services out your way? They're $100 a month in my neighborhood - boom! Problem solved! Although I kinda miss the days we were pissin' on the oak tree.

    Do you remember that scene in "The Fastest Indian" where the little boy asks "Bert" why he pees on his lemon tree?

    It sounds to me like you both have some assets that would strengthen the other person's position. Man, if you could make this thing work I would say this has way more benefits than most of the attempts at mergers and acquisitions and such that we hear about.

    You've known this guy for a while. You know what he is like, can you work out a deal where you give it a trial run where there are no strings for, say, six months or so?

    If I was in your shoes I would hate to pass on this opportunity - but I HATE PARTNERSHIPS!

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    What if you created a separate business that you were partners in? That way no one risks what they already have established.

    You could pool resources somehow?

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